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Friday, January 05, 2007

Nymex (NMX) Aims for ICE

On Sunday January 7th, Nymex Holdings (NMX) will be launching six financially settled futures contracts that aim to directly compete with contracts traded on the NYBOT. Rival Intercontinental Exchange (ICE) recently bought the NYBOT. The Nymex contracts will include Cocoa, Coffee, Cotton, Frozen OJ, and Sugar (#11 & #14). The contracts will trade fee free for six months. The question is whether the Nymex contracts will be liquid enough to compete after the initial six month period. With the two exchanges essentially listing the same products, more arbitrage opportunities will be created to take advantage of price discrepancies between the two exchanges. Nymex looks be the winner as it will grab market share from a space it was never involved in (soft commodities). With Nymex and ICE now both involved in soft commodities, the question is will the new contracts lead to greater interest in futures trading? We will soon find out.